The balance sheets for Mary Company showed the following information. Additional information concerning transactions and events during 2021 are presented below. Mary Company Balance Sheet December 31 2021 2020 Cash $ 31,209 $ 10,302 Accounts receivable (net) 43,733 20,503 Inventory 35,350 42,420 Long-term investments 0 15,150 Property, plant & equipment 238,865 151,500 Accumulated depreciation (38,077) (25,250) $311,080 $214,625 Accounts payable $ 17,170 $ 26,765 Accrued liabilities 21,210 17,170 Long-term notes payable 70,700 50,500 Common stock 131,300 90,900 Retained earnings 70,700 29,290 $311,080 $214,625 Additional data: 1. Net income for the year 2021, $61,610. 2. Depreciation on plant assets for the year, $12,827. 3. Sold the long-term investments for $33,330 (assume gain or loss is ordinary). 4. Paid dividends of $20,200. 5. Purchased machinery costing $26,765, paid cash. 6. Purchased machinery and gave a $60,600 long-term note payable. 7. Paid a $40,400 long-term note payable by issuing common stock. Prepare a statement of cash flows (using the indirect method) for 2021 for Mary Company. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
The balance sheets for Mary Company showed the following information. Additional information concerning transactions and events during 2021 are presented below.
| Mary Company |
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December 31
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2021
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2020
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| Cash |
$ 31,209
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$ 10,302
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43,733
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20,503
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| Inventory |
35,350
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42,420
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| Long-term investments |
0
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15,150
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| Property, plant & equipment |
238,865
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151,500 | ||||
| (38,077) | (25,250) | |||||
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$311,080
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$214,625
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| Accounts payable |
$ 17,170
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$ 26,765
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| Accrued liabilities |
21,210
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17,170
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| Long-term notes payable |
70,700
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50,500
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| Common stock |
131,300
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90,900
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70,700
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29,290
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$311,080
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$214,625
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Additional data:
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| 1. | Net income for the year 2021, $61,610. | |
| 2. | Depreciation on plant assets for the year, $12,827. | |
| 3. | Sold the long-term investments for $33,330 (assume gain or loss is ordinary). | |
| 4. | Paid dividends of $20,200. | |
| 5. | Purchased machinery costing $26,765, paid cash. | |
| 6. | Purchased machinery and gave a $60,600 long-term note payable. | |
| 7. | Paid a $40,400 long-term note payable by issuing common stock. |
Prepare a statement of
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Mary Company
Statement of Cash Flows Increase (Decrease) in Cash |
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$
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$
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